Cannabis Musings - August 5, 2024
Naked descheduling isn't happening.
Friends, last week, I got into a short back-and-forth on LinkedIn about advocating for the federal government to deschedule, rather than reschedule, cannabis. My sparring partner suggested that cannabis should be removed completely from the federal schedule of controlled substances, and the states should be left to their own devices to regulate or prohibit the product, free from any federal interference.
(Interestingly, there’s a side argument out there that nothing other than total descheduling should even be supported, because rescheduling is merely a handout to large multistate operators. Given that nearly all of the effect on the industry from rescheduling to Schedule III will be relief from the tax problem of 280E, I don’t buy this thesis. Granted, small operators may take advantage of 471(c) inventory accounting to mitigate 280E’s effects, but there’s still plenty of midsized companies that would benefit).
To paraphrase a now-overused meme, in my opinion, the industry needs to stop trying to make descheduling happen. Why? The point I made on LinkedIn is that the federal government is never going to do that without fully regulating and taxing the product. See, e.g., alcohol and tobacco. Are the FDA, DEA, and ATF really going to give up the chance to regulate the sale, use, and marketing of cannabis products? Is Congress really going to forego the delicious revenues that taxes on cannabis sales and licensing would generate? The answers to each of those questions is “No, never.” (Of course, theoretically, there’s a branch of the Everettian multiverse in which cannabis is descheduled without federal regulation and taxation, but Bayesian credence suggests the likelihood of that happening to be infinitesimally small, a point I’ve made before).
Now, to be clear, would I like the federal government to simply deschedule cannabis? Sure! Who in this industry wouldn’t want that to happen? Our jobs would be so much easier. But, one of my long-running concerns/frustrations/annoyances with this industry is its persistent delusion that the federal government is going to do anything to support the cannabis industry. We’re lucky enough that the Department of Justice hasn’t shut the entire thing down, and instead lets our work continue as a matter of grace. We’re particularly lucky that slow, incremental progress (such as rescheduling) has been made, thanks to the tireless work of industry advocates - I’m in no way trying to denigrate or diminish their work.
However, we need to be honest with ourselves about what’s realistic and what’s impossible. It’s realistic that, someday, we will have legalization. It’s possible that we will someday see the DOJ issue a memo guiding cannabis law enforcement to replace the long-gone Cole Memorandum, although I don’t think that happens before the Canna Provisions lawsuit gets finally resolved. Heck, it’s even possible that, maybe, someday, SAFE(R) will pass, although I still would bet the “Don’t Come” line on that. It’s simply not possible that we’re going to see naked descheduling.
This industry has limited resources in terms of cash and time. We’ve got to remove our rose-colored glasses and focus on what can happen, not a magical pipe dream of what we wish would happen. Fun loyter hofenung ver ikh nokh meshuge. (“Gorge on hope and you’ll sicken with madness.”). As we pursue the grand prize – full legalization – we need to push Congress and the White House for a plan that works with them, not against them. For too long we haven’t been honest with our constituents and, even worse, our investors, about the likelihood and timing of positive change – the consistent rug pulling and disappointment is a bad look. That’s a habit that we’ve got to break.
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Be seeing you!
© 2024 Marc Hauser and Hauser Advisory. None of the foregoing is legal, investment, or any other sort of advice, and it may not be relied upon in any manner, shape, or form. The foregoing represents my own views and not those of Jardín.
People argue this as if marijuana was not in any schedule and is just now being added to Schedule III. There is over 50 years of Schedule I to overcome here. Two things here: (1) HHS now recognizes medical value, which the amendment to the Single Convention in December of 2020 also recognized; and (2) lower potential for abuse. That is progress. I hate to see all the benefits going to businesses that have been operating illegally under federal law and will still be operating illegally after the schedule change, but I'll accept that uncomfortable result for now. That can always be adjusted later, or not.